Financing Sustainable Development

‌The post-2015 sustainable development agenda will require the mobilisation of a wide array of domestic and international resources from both public and private actors. While Official Development Assistance (ODA) will remain a crucial part of international development co-operation, particularly for countries most in need, a much stronger role for finance beyond ODA, including private capital, is also needed. The OECD DAC is modernising its statistical measurement framework to promote incentives for mobilising and catalysing development finance and to reflect the broader range of funding options now available to developing countries. Most importantly, a modernised system will also facilitate greater transparency and accountability.

Understanding the modernisation of development finance statistics

Defining what makes ODA “concessional”

The long-standing UN target -- 0.7% of donor GNI to be provided as ODA to developing countries – has played a fundamental role in rallying international support for development co-operation. Concessional loans have been an important part of ODA. In order to strengthen the integrity of this important metric, the DAC is revisiting the criteria used to determine if a loan is concessional, thus ensuring a more accurate assessment and comparison of donor effort and burden-sharing.

Designing a new measure for total official support for development

In 2012 the DAC agreed to “elaborate a proposal for a new measure of total official support for development” to complement the ODA measure. This measure would be designed to better recognise and further incentivise officially-supported resources – above and beyond ODA – that are provided to promote development in the developing world. Such a measure could encourage greater transparency about the nature and magnitude of such flows, enhance visibility and learning about development financing options and impacts, and stimulate innovation and risk-taking to help mobilise additional resources to meet the post-2015 financing challenges.

Ensuring support for the least developed countries

Because ODA is a scarce resource for financing development, it is important to ensure it reaches the countries and people that need it most. The DAC is keen to promote a more effective distribution of ODA in line with international commitments and pledges designed to ensure that no country -- including least developed countries (LDCs), low-income countries (LICs), small island developing states (SIDS), land-locked developing countries (LLDCs) and fragile and conflict-affected states – is left behind.

Leveraging private finance

Private-sector instruments, such as guarantees, collective investment funds and equity shares, can play an important role in mobilising additional resources from the private sector to finance the post-2015 agenda. Current DAC reporting practises do not facilitate recognition of these instruments in a consistent manner. This has created disincentives for using such instruments to catalyse additional resources from the private sector. It has also resulted in incomplete statistical reporting. The DAC is exploring new ways to improve statistical reporting of all financial instruments, their leverage effect, and the extent of donor effort involved.